Daily GVI Forex Forex View- Bernanke- No Surprises
The Daily Forex View
Bernanke- No Surprises
20:00 GMT- Apr 14 (global-view.com) Forex markets had a lot to focus on Wednesday with the U.S. releasing better than expected advance retail sales data on the open and tame CPI figures. Both SHOULD have been USD constructive, but the markets did not react to the news. Later, Fed Chairman Bernanke testified before the House Joint Economic Committee and gave no signals of a future change in Fed policy. Many in the markets had been hoping for the central bank to back away from its extended ease terminology, but it did not. The Fed Beige Book was mildly constructive. The EUR is trading stronger against the USD and especially vs. the JPY on what appeared to be short- covering and perhaps a large order or two. The Singapore dollar revalued earlier today on the back of robust economic growth.
Some feel that strong Chinese GDP (due tomorrow) will intensify the pressure on Beijing to revalue the yuan in due course. Comments by President Obama yesterday seemed to indicate that Chinese Premier Hu had rebuked pressure from the U.S. to upwardly adjust its currency.
The EURUSD remains up on the day while the EURGBP has eased slightly. The GBPUSD is up. The focus of trade mainly has been on position adjustments and perhaps reserve diversifications out of the USD. Dealers also have been keeping close tabs on Fed Chairman Bernanke who has sent no signals that the central bank may be tweaking its upcoming policy statements.
In the U.K., the general election is May 6. The vote has markets waiting each day for new headlines. A new poll released late Tuesday showed the slim lead of the Conservatives growing. This goes on for another weeks. Although most polls favor the Tories, opinion poll results have been mixed.
We still maintain a cautiously bearish bias for the EURUSD and GBPUSD. The EURGBP is a toss-up.
The EURCHF is firmer. Some have been noting that the SNB has changed tactics and it has has been in the markets supporting the EUR vs. CHF much of the time. Weakness of the EUR vs. the CHF is a bad omen for the EUR.
The USDJPY pair is steady, and the EURJPY cross is up even more. The Hatoyama government continues to pressure the Bank of Japan to stimulate growth and favors an easier exchange rate. A group of junior Japanese ruling party lawmakers (DPJ) called on the government Tuesday to push USDJPY to 120 to combat deflation. Some traders focus intently on the Japanese vs. U.S. 2-yr note spread (only the U.S. 2-yr moves much).
Chatter that there is a lot of yen waiting in the wings ready to be sold persists. We remain bullish USDJPY, but EURJPY is a tough call. Some say that an expected CNY revaluation would give the JPY a lift, but we would be surprised if the exchange rate is raised by more than a token amount.
The risk trade has been back on. The commodity currencies (CAD, AUD and NZD) are all higher. Recent comments by Canadian FinMin Flaherty suggest little concern about the strength of the currency. A strong currency eases the pressure from the central bank to tighten policy too early. Oil and gold are higher. The DOE crude draw (-2.mln bbd) was significantly greater than expected. We continue to favor the AUD and CAD from a fundamental perspective.
Far East equities closed higher. European bourses were up. U.S. equities are firmer. In U.S. Treasuries, many are watching the psychological 4.00% level in the 10-yr note. The U.S. 10-yr was last 3.86%, +4 bps. Bonds are a counter to risk trades because risk investments must somehow be financed. When the cost of money moves up (higher interest rates), the return and allure of risk trades falls.
UPCOMING DATA HIGHLIGHTS:Far East markets on Thursday will see revised Japanese industrial output. In Europe , Eurozone Trade data are due. In North America, the U.S.will release the closely followed weekly jobless claims data and the Empire PMI on the open, Later the monthly TIC data are due, followed by industrial Production and capacity utilization. Subsequently the Philly Fed index weekly natural gas inventories and the NAHB index are slated.
See ECONOMIC CALENDAR for a complete list of future forex market events and consensus data estimates. Go to the forex forum for up-to-date market developments and technical trading ideas.
John M. Bland is an author, and co-founder and partner of Global-View.com in 1996. Before that, he was a Vice-President and senior dealer in the fx inter-bank and futures trading arm of the Continental Grain Company in NYC. Previous to that, he was an early member of the Chemical Bank (NYC) corporate advisory service. He also worked in international liability management. John has an MBA from the Hass School at the University of California at Berkeley and a bachelors degree in International Economics from Berkeley.
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